Finance Minister Arun Jaitley should cut direct taxes in the upcoming Union Budget, a move that could make India more competitive and also boost the government's Make in India push, feels Adi Godrej, chairman of Godrej Group.
In an exclusive interaction with THE WEEK, Godrej is hopeful that this budget, coming on the back of the early hiccups from the Goods and Service Tax (GST) rollout, will be a growth oriented Budget. India's GDP growth hit a three-year low of 5.7 per cent in the April-June quarter and while it did rebound to 6.3 per cent in July-Sept, but its still far away from its peak.
“Generally growth has been low this year. So clearly, that should be the major focus of the Budget to ensure we have strong growth in the next financial year,” he said.
The tax cuts in a way could be a lever to aid growth, as it will encourage manufacturing activity. The US government recently announced sweeping tax cuts in a bid to make doing business in America more attractive. Godrej, feels that India needs to do the same, a move he says will also boost tax collections over time.
“The US has reduced its direct taxes and if we don't do the same, which has been promised for a long time, we won't remain competitive... We should realise that lower rate of taxes will give more income, because economy will do better, incomes will rise and government's collections will rise and not reduce,” said Godrej.
Apart from direct tax cuts, Godrej believes that a lot of steps need to be taken to boost agriculture. There were farmer protests in several parts of India in 2017, and several state governments announced farm loan waivers. Hopefully, the Budget will announce measures to boost rural incomes, and also given an impetus to animal husbandry, says Godrej.
“We do need to do a lot of things that will encourage agriculture, for example, although we have reasonably good direct tax laws for agriculture, we don't apply them to animal husbandry. Production of milk, eggs, etc... It is getting more and more important,” said Godrej.
The Godrej group is a major player in India's real estate market. While in recent years, the government has taken various steps to boost housing, for instance, it announced infrastructure status to affordable housing projects, he feels many more steps can be taken.
“Real estate is not picking up strongly. Certainly, it needs to be incentivised. While we have done some good things, especially for affordable housing, we do need to do much more to encourage more housing,” added Godrej.
